An Active Utilities ETF Celebrates Two Years of Outperformance

As investors turned to income generating alternatives in a stubbornly low yielding environment, utilities sector and related ETFs have enjoyed a strong year, with one standout active ETF option also celebrating a two year run.

The Reaves Utilities ETF (NYSEArca: UTES), an actively managed utilities ETF, has increased 15.9%, compared to the Utilities Select Sector SPDR (NYSEArca: XLU), which tracks utilities companies in the S&P 500, rose 13.8%. UTES also comes with a 2.00% 12-month yield.

UTES, which launched back in September 23, 2015, is the first and only actively managed utilities-related ETF and has celebrated two-years of outperforming its benchmark.

“Reaching the two-year mark is an important milestone for us,” John Bartlett, co-portfolio manager of UTES, said in a note. “In our view, the fundamental outlook for utilities is positive with a supportive regulatory environment and multiple opportunities for companies to make needed investments in infrastructure and earn an acceptable return.”

The fund’s co-portfolio manager Jay Rhame credits the fund’s outperformance on Reaves’ ability to incorporate its half-century experience in the utilities sector, such as the money manager’s understanding of the industry’s complex regulatory landscape at both the state and federal level. Due to the active ETF’s greater flexibility, UTES can avoid some of the downside that a passive index-tracking fund captures and potentially recover upside from other areas.